FX STRATEGY | FX QUANT INSIGHT

FX Positioning Analysis
19 September 2016
Non Independent Research – Marketing Communication

Michael Sneyd  Risk-taking in G10 FX appears to have reduced ahead of the

+44 207 595 1307 Fed, with long positions in the AUD cut to +5 from +16 and long
NZD positions cut to +3 from +16.
 The market remains net short USD, but has reduced the size of
its short to -9.
 Heading into the BoJ this week, JPY long positioning has
increased to a score of +23. There had been a reduction of JPY
long positioning since its peak in July, but this move returns
JPY to the largest long position in the market.
Chart 1 : BNP Paribas FX Positioning Analysis – Overall Positioning*
SHORT LONG
JPY 23
NOK 13
CHF 5 19-Sep-2016
AUD 5 12-Sep-2016
EUR 5
NZD 3
USD -9
CAD -12
SEK -21
GBP -37

-50 -40 -30 -20 -10 0 10 20 30 40 50

Source: BNP Paribas

*The positioning scores above are reported as a percentile FX Fund BNPP

Client Risk
based on the prior five years of data. These percentiles are IMM Position Trending
Exposure Reversals
rescaled to give a value between -50 and +50. Values above Tracker Indicator
40 and below -40 represent extreme positions. 11 -22 -6 -16 -14 USD
-4 -2 33 -4 0 EUR
To interpret a score of -27, for example, add 50 to give 23.
This tells us that 23% of observations over the past five years 29 46 39 -36 40 JPY
have been below the current observation. -49 -48 -38 -6 -46 GBP
-12 17 29 5 -15 CHF
-29 26 -48 12 -23 CAD
15 22 -24 3 9 AUD
-2 -3 -35 17 36 NZD
22 - 1 -5 34 NOK
-11 - -8 -43 -5 SEK

• Client exposure – Internal sales desks’ estimate of FX investor exposure

• IMM – The commitment of traders (COT) is a widely used proxy for US-based hedge-fund/CTA activity
• Risk reversals – Risk reversals indicate the relative price of calls relative to puts, and thus incorporate an option “market sentiment”
• FX Fund position tracker – Regression based decomposition of currency fund positioning
• BNPP trending indicator – A technical measure of the strength of a currency’s momentum
The overall currency score is then calculated as the equally weighted average of the components

Non Independent Research - Marketing Communication Please refer to important information at the end of the report www.GlobalMarkets.bnpparibas.com
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Chart 2: Absolute Total G10 Positioning

Overall absolute FX Positioning

270 5y Average

220

170

120

70
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

3 Year historic plot of G10 currency positioning scores

Chart 3: USD Overall Positioning Chart 4: GBP Overall Positioning

50 50

30 30

10 10

-10 -10

-30 -30

-50 -50
Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16
Chart 5: EUR Overall Positioning Chart 6: JPY Overall Positioning

50 50

30 30

10 10

-10 -10

-30 -30

-50 -50
Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16
Chart 7: AUD Overall Positioning Chart 8: CAD Overall Positioning

50 50

30 30

10 10

-10 -10

-30 -30

-50 -50
Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16

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Chart 9: NZD Overall Positioning Chart 10: CHF Overall Positioning

50 50

30 30

10 10

-10 -10

-30 -30

-50 -50
Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16
Chart 11: NOK Overall Positioning Chart 12: SEK Overall Positioning

50
45
35 30
25
15 10
5
-10
-5
-15 -30
-25
-35 -50
Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16

1 Year historic plot of G10 currency positioning individual scores

Chart 13: USD Overall Positioning Chart 14: GBP Overall Positioning
50 50

30 30

10 10

-10 -10

-30 -30

-50 -50
Sep-15 Dec-15 Mar-16 Jun-16 Sep-15 Dec-15 Mar-16 Jun-16
BNPP Trending Indicator IMM BNPP Trending Indicator IMM
Risk Reversals Fund Position Tracker Risk Reversals Fund Position Tracker
Client Survey Client Survey

Chart 15: EUR Overall Positioning Chart 16: JPY Overall Positioning
50 50

30 30

10 10

-10 -10

-30 -30

-50 -50
Sep-15 Dec-15 Mar-16 Jun-16 Sep-15 Dec-15 Mar-16 Jun-16
BNPP Trending Indicator IMM BNPP Trending Indicator IMM
Risk Reversals Fund Position Tracker Risk Reversals Fund Position Tracker
Client Survey Client Survey

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Chart 17: AUD Overall Positioning Chart 18: CAD Overall Positioning
50 50

30 30

10 10

-10 -10

-30 -30

-50 -50
Sep-15 Dec-15 Mar-16 Jun-16 Sep-15 Dec-15 Mar-16 Jun-16
BNPP Trending Indicator IMM BNPP Trending Indicator IMM
Risk Reversals Fund Position Tracker Risk Reversals Fund Position Tracker
Client Survey Client Survey

Chart 19: NZD Overall Positioning Chart 20: CHF Overall Positioning
50 50

30 30

10 10

-10 -10

-30 -30

-50 -50
Sep-15 Dec-15 Mar-16 Jun-16 Sep-15 Dec-15 Mar-16 Jun-16
BNPP Trending Indicator IMM BNPP Trending Indicator IMM
Risk Reversals Fund Position Tracker Risk Reversals Fund Position Tracker
Client Survey Client Survey

Chart 21: NOK Overall Positioning Chart 22: SEK Overall Positioning
50 50

30 30

10 10

-10 -10

-30 -30

-50 -50
Sep-15 Dec-15 Mar-16 Jun-16 Sep-15 Dec-15 Mar-16 Jun-16
BNPP Trending Indicator Risk Reversals BNPP Trending Indicator Risk Reversals

Fund Position Tracker Client Survey Fund Position Tracker Client Survey

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FX – Global Strategy Contacts

Cross Asset Strategy

Michael Sneyd, CFA Macro Quantitative Strategist London 44 20 7595 1307 michael.sneyd@uk.bnpparibas.com

Foreign Exchange

Steven Saywell Global Head of FX Strategy London 44 20 7595 8487 steven.saywell@uk.bnpparibas.com

Sam Lynton-Brown FX Strategist London 44 20 7595 8467 sam.lynton-brown@uk.bnpparibas.com

Clara Leonard FX Strategist London 44 20 7595 1424 clara.leonard@uk.bnpparibas.com

Daniel Katzive, CFA Head of FX Strategy North America New York 1 212 841 2408 daniel.katzive@us.bnpparibas.com

Vasilis Koutsaftis FX Options Strategist New York 1 212 471 7973 vasilis.koutsaftis@americas.bnpparibas.com

Emerging Markets FX & IR Strategy

Wike Groenenberg Global Head of EM Strategy London 44 20 7595 8746 wike.groenenberg@uk.bnpparibas.com

Piotr Chwiejczak FX & IR CEEMEA Strategist London 44 20 7595 8715 piotr.chwiejczak@uk.bnpparibas.com

Erkin Isik, CFA FX & IR CEEMEA Strategist Istanbul 90 216 635 2987 erkin.isik@teb.com.tr

Mirza Baig Head of FX & IR Asia Strategy Singapore 65 6210 3262 mirza.s.baig@asia.bnpparibas.com

Jennifer Kusuma FX & IR Asia Strategist Singapore 65 6210 3263 jennifer.kusuma@asia.bnpparibas.com

Altaz Dagha AU/NZ IR Strategist Singapore 65 6210 4994 altaz.dagha@asia.bnpparibas.com

Kun Shan China Strategist Shanghai 86 21 2896 2773 kun.shan@asia.bnpparibas.com

Tianhe Ji China Strategist Shanghai 86 21 2896 2785 tianhe.ji@asia.bnpparibas.com

Gabriel Gersztein Head FX & IR Latam Strategy Sao Paulo 55 11 3841 3421 gabriel.gersztein@br.bnpparibas.com

Samuel Castro FX & IR Latam Strategist Sao Paulo 55 11 3841 3492 samuel.castro@br.bnpparibas.com

Gustavo Mendonca FX & IR Latam Strategist Sao Paulo 55 11 3841 3445 gustavo.mendonca@br.bnpparibas.com

Production and Distribution

Barbara Consuelo, Foreign Exchange, London. Tel: 44 20 7595 8486, Email: Barbara.Consuelo@uk.bnpparibas.com

Amanda Grantham-Hill, London. Tel: 44 20 7595 4107, Email: amanda.grantham-hill@uk.bnpparibas.com

Anna McLauchlin, London. Tel: 44 20 7595 3754, Email: anna.mclauchlin@uk.bnpparibas.com

Louise Bylicki, New York. Tel: 1 212 471 6479, louise.bylicki@us.bnpparibas.com

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